The next step is to eliminate the poisonous conflicts of interest in the audit profession which are undermining market confidence and ruining the credibility of the financial statements .
PwC auditor Stephen Burke has been chastised by the corporate regulator over the botched audit of share market failure Vocation Ltd. We don’t say this often but the Australian Securities & Investments Commission (ASIC) ought to be commended for moving on PwC.
Little has been said however of the profound issues behind Burke’s reprimand. We rang the warning bells about Vocation and its auditor seven months ago. The essential problem here is that PwC was donning two hats as usual; in this case as auditor and investigating accountant for the Vocation share market float.
PwC signed off as investigating accountant to the Vocation Ltd float prospectus in 2013, then subsequently endorsed a new accounting policy which allowed Vocation to increase its 2014 financial year revenue by nearly $15.9 million and its profit by $7.6 million.
The Vocation imbroglio demonstrates that the same Big 4 audit firm should not review the forecasts in a company prospectus and then audit its subsequent financial results, results which will be compared to the original forecasts.
The more damaging conflict globally is the Big 4 doing multinational audits and tax advice for the same company. These firms are the engineers of global tax avoidance but are posing as the gatekeepers of finance too, via the audit function. Audit has no credibility. It has become a loss leader.
How can audit have any credibility when the same firms, just a stroll down the padded hallways are concocting barely legal schemes to help their multinational clients skive out of tax?
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.